In-Service 401(k) Rollovers

Mary Ann Ferreira
Financial Advisor and Shareholder

Written by Mary Ann Ferreira, CFP®, CDFA™, AIF®

Does it make sense for you to do an “In-Service” (while still working) rollover of your 401(k) assets? Some 401(k) plans have high fees and expenses. In addition, the investment choices available in these retirement plans are sometimes limited. As a result of TIPRA (Tax Increase Prevention Reconciliation Act), tax laws now permit in-service distributions from your retirement plan while you continue working. This money can be distributed into a self-directed IRA Rollover account.

Not all company-sponsored retirement plans offer In-Service 401(k) withdrawals/rollovers. To find out if your company-sponsored retirement plan offers In-Service 401(k) rollovers, contact your plan administrator or ask for a copy of the Summary Plan Document. There may be some additional requirements such as age (typically after 59½) and eligibility (employee must have been a participant in the plan for five years or the funds have to have been in the plan for two years).

In order to avoid incurring a tax liability, the rollover must go directly to your custodian, e.g. Charles Schwab, Fidelity, or TD Ameritrade, and be deposited into your IRA Rollover account. This will enable you to continue to benefit from the tax-deferred growth without an immediate tax liability or penalty. You can maintain your contributions to your 401K and receive any employer matching.

Below are some reasons to consider a 401(k) retirement plan “In-Service” rollover to a self-directed IRA Rollover account.

● Flexibility of investment choices
● Diversification of concentrated positions
● Simplify estate planning
● Consolidate retirement accounts
● Receive professional guidance and have your assets managed by Viridian

Another reason to consider an “In-Service” 401(k) withdrawal is that you can sometimes roll 401(k) money directly into a Roth IRA where future earnings will be tax free.

Please do not hesitate to give your Viridian advisor a call to discuss this investment strategy.